February 13, 2009 – Key provisions advocated by the National Modular Housing Council, MHI, and the housing industry are included in the final economic stimulus package after days of negotiation by lawmakers. “MHI applauds Congress for taking action on a stimulus package that recognizes the critical role that housing plays in the economic recovery of this nation by providing incentives to purchase homes and to keep businesses afloat,” said Gail Cardwell President and CEO of MHI.

The House and Senate are scheduled to vote today on H.R. 1, the “American Recovery and Reinvestment Act of 2009”. The following link contains the complete legislative text (which is over 500 pages) of all tax provisions included in the final package: finance.senate.gov/sitepages/leg/LEG%202009/021209%20Leg%20text%20of%20Divsion%20B%20of%20the%20American%20Recovery%20and%20Reinvestment%20Act.pdf. Once the House and the Senate pass the final package, it will go to the President who is expected to sign it into law as soon as possible.

Below is a brief summary of a major housing tax credit and other tax provisions that would impact the industry and our customers. (You are cautioned to consult with a tax expert for a fuller explanation of any particular provision.)

Refundable First-Time Home Buyer Credit

Last year, Congress provided taxpayers with a refundable tax credit that was equivalent to an interest-free loan equal to 10 percent of the purchase of a principal residence (up to $7,500) by first-time home buyers. The provision applies to homes purchased on or after April 9, 2008 and before July 1, 2009. Taxpayers receiving this tax credit are currently required to repay any amount received under this provision back to the government over 15 years in equal installments, or, if earlier, when the home is sold. The credit phases out for taxpayers with adjusted gross income in excess of $75,000 ($150,000 in the case of a joint return).

The stimulus package eliminates the repayment obligation for taxpayers that purchase homes after January 1, 2009, increases the maximum value of the credit to $8,000, removes the prohibition on financing by mortgage revenue bonds, and extends the availability of the credit for homes purchased before December 1, 2009. The provision would retain the credit recapture if the house is sold within three years of purchase. Any unused amount of the tax credit will be refunded to homebuyers after their tax returns are filed.

MHI will develop further guidance regarding the homebuyer tax credit for use by its members in working with first-time homebuyers of manufactured and modular homes.

“Making Work Pay” Tax Credit

The bill would cut taxes for more than 95% of working families in the United States. For 2009 and 2010, the bill would provide a refundable tax credit of up to $400 for working individuals and $800 for working families. This tax credit would be calculated at a rate of 6.2% of earned income, and would phase out for taxpayers with adjusted gross income in excess of $75,000 ($150,000 for married couples filing jointly). Taxpayers can receive this benefit through a reduction in the amount of income tax that is withheld from their paychecks, or through claiming the credit on their tax returns.

5-Year Carryback of Net Operating Losses for Small Businesses

Under current law, net operating losses (“NOLs”) may be carried back to the two taxable years before the year that the loss arises (the “NOL carryback period”) and carried forward to each of the succeeding twenty taxable years after the year that the loss arises.

For 2008, the bill would extend the maximum NOL carryback period from two years to five years for small businesses with gross receipts of $15 million or less.

Extension of Enhanced Small Business Expensing

In order to help small businesses quickly recover the cost of certain capital expenses, small business taxpayers may elect to write-off the cost of these expenses in the year of acquisition in lieu of recovering these costs over time through depreciation.

Until the end of 2010, small business taxpayers are allowed to write-off up to $125,000 (indexed for inflation) of capital expenditures subject to a phase-out once capital expenditures exceed $500,000 (indexed for inflation). Last year, Congress temporarily increased the amount that small businesses could write-off for capital expenditures incurred in 2008 to $250,000 and increased the phase-out threshold for 2008 to $800,000. The bill would extend these temporary increases for capital expenditures incurred in 2009.